Amazon (AMZN, Financial) absolutely bagged 2016, there’s no doubt about it. After reports that the tech giant captured nearly 37% of this year’s online holiday shopping, Amazon Echo now surprises us with an impressive milestone of its own: nine times as many Echos, Taps and Dots were sold this holiday season as the same period in 2015.
Though Amazon does not give us a clear picture of the number of Alexa-enabled smart speakers the company sells, according to estimates by CIRP, the company has sold more than 5 million devices since its launch in 2014.
A virtual personal assistant is not ground-breaking technology. Apple (AAPL, Financial) has Siri, Microsoft (MSFT, Financial) has Cortana, Google (GOOG, Financial) has Google Assistant and Amazon has Alexa. Unlike the operating system-dependent counterparts such as Siri and Cortana, however, the Echo is more of a standalone hardware-dependent device.
Now, any company can build a device that can be powered by Apple’s Siri or Microsoft’s Cortana in the background, but even then, the utility provided by such devices won't be able to match the retail exposure that the Amazon Echo - Alexa combo can ever bring to smart speakers.
Amazon already provides support for placing orders using voice commands with Alexa. Once you make a purchase request on Alexa, it will search for the item, tell you the name and price, add it to your cart, provide you with additional details about shipping and, if you verbally confirm the order, it’s just like placing any other online order.
“When you make a voice purchase request, Alexa searches through several purchase options:
- Your order history - only Prime-eligible items.
- Amazon's Choice - Amazon's Choice items are highly rated, well-priced products that are available to order immediately.
- Prime-eligible items - including delivery by Prime Now for eligible items.” - Amazon
With millions of devices already sold in the U.S., Amazon has just made it extremely easy for you to make ad hoc orders on its platform. No need to even go through the catalogue, search for it and make multiple clicks to get your order through. All you have to do is talk to Alexa. The more homes Amazon Echo devices penetrate, the higher the potential monetary value to Amazon in the longer run.
This makes it unlike any other similar device available on the market today. It is the only product in its class that has access to such a massive retail collection. And to make it even more enticing, Amazon has piled on extra benefits for Prime members shopping through Alexa, which means the device on top of a Prime membership makes much more sense.
Coupled with Amazon Prime’s staggering growth in the last few years, the growth of Amazon Echo powered by Alexa will provide a huge runway for Amazon in the ever-competitive U.S. market. And the U.S. being a model country of sorts, once it tastes success here, the company will obviously try to repeat that all over the world. The easier Amazon makes it for customers to order more and through different ways, the longer they’ll stay within its four walls.
In other words, Alexa on the Echo is yet another way for consumers to enter Amazon’s well-monetized ecosystem, and yet another moat the company has built against its tech competitors as well as its retail ones.
Disclosure: I have no positions in the stocks mentioned above and no intention to initiate a position in the next 72 hours.
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